Unitary Patent Coming to Europe

With the introduction of the Unitary Patent and the Unified Patent Court (UPC), which is envisaged for 2016, Europe will finally see a single patent for 24 countries and a single court at European level to enforce both the new Unitary Patent and traditional European patents.

Patent protection in Europe is currently positioned at national level. Next to strictly national patents there is a central system for the prosecution of patents for 38 countries, the European Patent, but after grant these European patents still need to be registered in each country where protection is needed. For the purpose of enforcement and for all other practical purposes, these patents are then subject to national law. As a consequence, enforcement needs to take place in the national courts on a country-by-country basis; cross-border injunctions for the 28 EU countries are only available in exceptional situations. In practice this doesn’t mean that each patent needs to be or even can be litigated in all 38 countries. To begin with, most patents are only registered in a limited number of countries, often based on the size of their economy. If the infringement then takes places in another European country, there is no protection. In those cases where patents are litigated, there will often be settlement negotiations after judgments have been rendered in key jurisdictions such as Germany and the United Kingdom, but this varies from case to case. As a result, it is hard to plan for effective protection of innovation, to develop a patent strategy up front and to valuate European patents.

All of this is about to change dramatically. 24 EU Member States have joined forces to create a single patent covering their joint territory, the Unitary Patent. This patent will have the same effect in all of these countries and will require just one central registration and one annual fee, which will be handled by the European Patent Office. The legal basis for this is a so-called EU Regulation implementing enhanced cooperation. Such a Regulation is the responsibility of the participating Member States, but otherwise has the same status as a regular EU Regulations, which inter alia means that the Court of Justice of the European Union has jurisdiction to establish its correct interpretation. For now, Croatia, Italy, Poland and Spain do not participate, but at least some of these may join in the near future.

The Unitary Patent is created by applying for unitary effect within one month after grant of a European patent. Thus, the prosecution of Unitary Patents is exactly the same as for traditional European patents. The fact that the decision whether or not to apply for unitary effect is taken after grant means that the applicant can take into account how strong the patent came out of prosecution. The option to choose the traditional European patent that needs to be registered nationally will remain available. If protection is really only needed in just a few countries, or if the patent is considered especially vulnerable in a central attack, this may be a useful option.

From a business perspective the Unitary Patent has obvious advantages. The unitary effect makes the patent much more manageable. It covers a market of 400 million consumers. It is also much easier to attribute a concrete value to such a patent for investment and taxation purposes.

In addition to the Unitary Patent, a whole new international court system is being set up for the enforcement of patents, the Unified Patent Court. This court will have jurisdiction to handle actions on infringement and validity of both Unitary Patents and traditional European patents for 25 participating EU Member States (including Italy, for the traditional patents). Through this new court, a decision covering all 25 countries in full proceedings on the merits can be obtained in around a year. The Court of Appeal in Luxembourg will handle appeals in less than a year. The procedural law has been developed on the basis of experience throughout Europe, but as a totally new and independent system. The substantive law on validity is in the European Patent Convention, the substantive law on infringement is in the UPC Agreement itself. The costs of such litigation are not yet known, but given the structure of the system, they will probably be somewhat higher than litigation in a single continental European country, but not that much. In return you get a decision that is immediately enforceable in 25 countries.

The downside of this obviously is that the patent can also be invalidated for 25 countries at once. However, there will be a transitional period of 7 years, which will almost certainly be extended to 14 years, during which parties can choose to bring actions on traditional European patents before national courts. In addition, during this period the patent owner can opt-out a traditional European patent from the jurisdiction of the Unified Patent Court for its entire life span, thus excluding a central attack on its validity. He can opt-in again at any time if the patent needs to be enforced, unless actions in national courts have been started in the meantime.

The judges for this new court will be recruited across Europe. The core will consists of experienced patent judges, who will be working at the Unified Patent Court next to their national courts. Cases in first instance will be handled by panels of three legal judges, supplemented by a technical judge where needed. The expectation is that at least two out of the three legal judges on each panel will have a lot of experience, whereas the third will initially be less experienced.

The Court of First Instance will have divisions for handling infringement cases and counterclaims for invalidity in many major European cities, including London, Düsseldorf, Munich, Mannheim, Hamburg, Paris, The Hague, Brussels, Milan, Helsinki, Copenhagen, Dublin and Vienna. Sweden and the Baltic states will cooperate in a regional division based in Stockholm. Many Eastern European countries are also expected to set up joint regional divisions. In most of these divisions litigation will be possible in English, next to the national language of the country that hosts the division. Divisions in the major patent jurisdictions will always have two judges from that country on the panel, which will create some “couleur locale” and consequently some forum shopping within the court, but also reliability. An independent attack on the validity of the patent will have to be started in the Central Division, which will hold hearings in Paris (electronics patents), London (life sciences patents) and Munich (mechanical patents). This was a typical political compromise, but the judges will be part of the same international pool, so the location will not affect the way a case is handled.

The basics of the procedural law for this new court are in the UPC Agreement, but the details are in a comprehensive set of Rules of Procedure, drafted by an independent team of patent judges and patent litigators from the UK, Germany, France and The Netherlands. The procedure is quite front loaded and strictly managed by a judge-rapporteur. Besides, it is totally digital, except for the hearings. The first stage is the so-called written procedure, during which both parties can file submissions and evidence online according to a strict schedule of deadlines. This is followed by an interim procedure of three months, during which the judge-rapporteur will prepare the case for the oral hearing. He will decide whether additional evidence is needed and whether experts and witnesses need to be heard. The final stage is the oral procedure before the panel, which may include witness and expert hearings and a day in court for the pleadings. The pleadings themselves are supposed to take just a single day, but in complicated cases they might take two or three. A judgment on the merits will then be available in six weeks. Overall, this will be a very effective, expedient and highly professional system to enforce patents in Europe.

The whole system is supposed to go live in 2016. It will make patenting and patent enforcement in Europe much more attractive to US based companies. Together with a new system for protection of trade secrets, which is also being enacted at EU level, it will offer solid protection for innovation. In preparation of this, it is important to start developing a strategy for Europe now, since the patent portfolio needs to be shaped to fit the new system, including decisions on prosecution, filing divisionals and maybe opt-out applications, which probably already can be filed during a sunrise period starting later this year.